Tuesday, April 23, 2013

Over the past couple of days I had few
twitter exchanges about the term ‘carbon bubble’. These were triggered by a
(rhetorical?) question from Maarten Hajer who asked: "'Carbon bubble' is quite a catchy new
discourse. Can this language turn the tables?"

The reference was to this Guardian
story, printed on the title page on Friday 19 April (Carbon bubble will plunge the world into
another financial crisis).

The so-called "carbon bubble" is the result of an over-valuation of oil, coal and gas reserves held by fossil
fuel companies.

At least two-thirds of
these reserves will have to remain underground if the world is to meet
existing internationally agreed targets to avoid the threshold for
"dangerous" climate change. If the agreements hold, these reserves will be in effect
unburnable and so worthless – leading to massive market losses. But the stock
markets are betting on countries' inaction on climate change.”

So the warning is that we will see a burst
of the overvalued fossil fuels IF the international agreements will be
implemented. This is a paradox and a somewhat off-putting political message. It
makes us wonder what to prefer, a world with perhaps serious, dangerous long-term
climate change, or a world with another certain financial collapse. If put in
front of this dilemma, I am sure people will not think twice what to prefer.
The political message of the metaphor seems to be defeatist.

The carbon bubble metaphor suggests that
the ‘over-valuation’ of fossil fuels cannot go on because there is urgent
political action looming. But how convincing is this argument? What we have
seen in the past years was a bursting of renewable energy bubbles, and a
dramatic fall in coal prices as a result of the production of cheap shale gas.
Of course one might say, in the long run fossil fuels will be phased out and
therefore no longer profitable. But this will happen only if and when cheaper
low carbon technologies are introduced and markets make a transition. Current
climate policies are toothless. Such a transition can take many forms depending
on how well they are managed. True, financial and economic disruptions cannot
be excluded in the transition and climate campaigners always knew this (or
should have known).

In my reading the whole argument (and the
metaphor) of carbon bubbles is based on wishful thinking. It wants to believe
that the 2 degree goal will be somehow implemented and that therefore the
fossil fuel companies and their assets will go bust. The bubble metaphor is
supposed to convey a sense of alarm. Rhetoric as usual, from the usual
suspects.

Yet, there may be a subtler message here.
If the link between overvalued assets and serious climate policy exists, this
means that the very climate policy might trigger a crisis if the transition
into a low carbon economy is not well managed. And in this sense the bubble
talk has perhaps some merit. It indicates that effective climate policies may
lead to economic disruption. And the hesitancy on part of policy makers with
regard to such policies might be explained by this very possibility.

7
comments:

Stern assumes that:1. the long-term value of fossil fuel assets will be affected by climate policy; this would only be true if climate policy is kept secret from the market;2. the value of fossil fuel companies is to a large extent determined by the reserves they own; this is simply not true; expected profits in the short term are far more important;3. a sharp drop in the value of fossil fuel companies causes an economic crises; empirical evidence suggests otherwise; we've seen large energy companies wobble and fall without wider ramifications.

"the whole argument (and the metaphor) of carbon bubbles is based on wishful thinking."

Better to say delusional. In coming decades, dissertations will be written on the madness of climate alarmism of the early 21st century, just like books have been written about the tulip bubble and end-of-the-world religious cults.

are you sure that the Naomi Klein article has something to do with the carbon bubble problem? She argues for green groups' divestment from fossil fuel polluters; not because of a carbon bubble, but for environmental (climate change) reasons. Different issue, right?

Wernerboth issues are connected. The divestment idea has a direct bearing on the carbon bubble rhetoric. As one commentar wrote on Klein's article:

'The overall message is clear: Environmentalist bean-counters, watch out.And an additional pecuniary and a-moral argument: with the Carbon Bubble hovering in the background above to go *POP*, they stand to lose a lot anyway.'

no doubt, you can connect. But one should not confound symbolic and monetary capital; you cannot judge the value of the first by the outcome of the second. And I understand Naomi Klein's call for disinvestment as a question of attitude, of political correctness in the first place. At least, she does not mention the carbon bubble theory. Instead, she tries to agitate campuses and tries to establish a moral standard on NGOs. If this makes sense in terms of carbon output etc is another question, of course. But of course, nobody wants to see Greenpeace invest its capital into EXXON, right?

Yes, I agree. Although I can imagine quite a few people who would like to see Greenpeace investing its capital into EXXON ;-)

Having said this, the problem of a moralising discourse with regard to climate is that we would not know where to stop. Virtually every act of our daily lives is connected to fossil fuel use and it is impossible to draw a line between 'good' and 'evil' lifestyles. There is, of course a lot of easy symbolic action (against SUV's - pro ethical shopping). But if you face the harsh realities, you realize how implicated everyone is, including the Greens, greens, fundamental GREENs, etc. So I read Klein's piece as an attempt to show a way where symbolically at least a clear demarcation line can be drawn, between good and evil. At the same time I suspect it has deeper motives and is intended to connect to the carbon bubble story.

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